SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _____
Commission file number: 0-19232
Fidelity Leasing Income Fund VII, L.P.
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 23-2581971
_______________________________________________________________________________
(State of organization) (I.R.S. Employer Identification No.)
3 North Columbus Boulevard, Philadelphia, Pennsylvania 19106
_______________________________________________________________________________
(Address of principal executive offices) (Zip code)
(215) 574-1636
_______________________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the regis-
trant was required to file such reports), and (2) has been subject to such fil-
ing requirements for the past 90 days.
Yes __X__ No _____
Page 1 of 12
Part I: Financial Information
Item 1: Financial Statements
FIDELITY LEASING INCOME FUND VII, L.P.
BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
March 31, December 31,
1998 1997
___________ ____________
Cash and cash equivalents $ 1,870,009 $ 3,185,012
Accounts receivable 275,600 440,830
Due from related parties 133,403 444,897
Equipment under operating leases
(net of accumulated depreciation
of $7,228,592 and $6,817,100, 8,257,519 6,214,378
respectively)
Net investment in direct financing leases 272,510 295,319
Equipment held for sale or lease 21,188 39,958
___________ ___________
Total assets $10,830,229 $10,620,394
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Lease rents paid in advance $ 165,070 $ 101,304
Accounts payable-equipment - 7,050
Accounts payable and
accrued expenses 428,132 100,885
Due to related parties 122 42,321
___________ ___________
Total liabilities 593,324 251,560
Partners' capital 10,236,905 10,368,834
___________ ___________
Total liabilities and
partners' capital $ 10,830,229 $10,620,394
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1998 and 1997
(Unaudited)
1998 1997
________ ________
Income:
Rentals $1,029,382 $1,201,080
Earned income on direct financing leases 5,526 626
Interest 25,442 42,690
Gain on sale of equipment, net 916 49,165
Other 1,190 1,810
__________ __________
1,062,456 1,295,371
__________ __________
Expenses:
Depreciation 908,256 998,376
Write-down of equipment to net
realizable value 63,700 10,625
General and administrative 39,386 19,825
General and administrative to related
party 57,353 60,824
Management fee to related party 45,690 60,117
__________ __________
1,114,385 1,149,767
__________ __________
Net income (loss) $ (51,929) $ 145,604
========== ==========
Net income (loss) per equivalent
limited partnership unit $ (1.72) $ 4.68
========== ==========
Weighted average number of
equivalent limited partnership
units outstanding during the period 29,850 30,771
========== ==========
The accompanying notes are an integral part of these financial statements.
3
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENT OF PARTNERS' CAPITAL
For the three months ended March 31, 1998
(Unaudited)
General Limited Partners
Partner Units Amount Total
_______ _____ ______ _____
Balance, January 1, 1998 $(30,664) 65,449 $10,399,498 $10,368,834
Cash distributions (800) - (79,200) (80,000)
Net loss (519) - (51,410) (51,929)
________ ______ ___________ ___________
Balance, March 31, 1998 $(31,983) 65,449 $10,268,888 $10,236,905
======== ====== =========== ===========
The accompanying notes are an integral part of these financial statements.
4
FIDELITY LEASING INCOME FUND VII, L.P.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1998 and 1997
(Unaudited)
1998 1997
________ ________
Cash flows from operating activities:
Net income (loss) $ (51,929) $ 145,604
__________ ___________
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation 908,256 998,376
Write-down of equipment to net
realizable value 63,700 10,625
Proceeds from direct financing leases, net
of earned income 22,809 2,548
Gain on sale of equipment, net (916) (49,165)
(Increase) decrease in accounts receivable 165,230 61,909
(Increase) decrease in due from related parties 311,494 (19,050)
Increase (decrease) in lease rents paid
in advance 63,766 (23,796)
Increase (decrease) in account payable-equipment (7,050) -
Increase (decrease) in accounts payable and
accrued expenses 327,247 3,252
Increase (decrease) in due to related parties (42,199) (11,559)
__________ __________
1,812,337 973,140
__________ __________
Net cash provided by operating activities 1,760,408 1,118,744
__________ __________
Cash flows from investing activities:
Acquisition of equipment (3,097,961) (13,067)
Proceeds from sale of equipment 102,550 57,033
__________ __________
Net cash provided by (used in)
investing activities (2,995,411) 43,966
__________ __________
Cash flows from financing activities:
Distributions (80,000) (170,000)
__________ __________
Net cash used in financing activities (80,000) (170,000)
__________ __________
Increase (decrease) in cash and cash
equivalents (1,315,003) 992,710
Cash and cash equivalents, beginning
of period 3,185,012 2,983,264
__________ __________
Cash and cash equivalents, end of period $1,870,009 $3,975,974
========== ==========
The accompanying notes are an integral part of these financial statements.
5
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
The accompanying unaudited condensed financial statements have been prepared
by the Fund in accordance with Generally Accepted Accounting Principles,
pursuant to the rules and regulations of the Securities and Exchange Commis-
sion. In the opinion of Management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
1. EQUIPMENT LEASED
Equipment on lease consists primarily of computer equipment under operating
leases. The lessees have agreements with the manufacturer of the
equipment to provide maintenance for the leased equipment. The Fund's
operating leases are for initial lease terms of 21 to 60 months. Generally,
operating leases will not recover all of the undepreciated cost and related
expenses of its rental equipment during the initial lease terms and the
Fund is prepared to remarket the equipment in future years. Fund policy is
to review quarterly the expected economic life of its rental equipment in
order to determine the recoverability of its undepreciated cost. Recent
and anticipated technological developments affecting computer equipment and
competitive factors in the marketplace are considered among other things,
as part of this review. In accordance with Generally Accepted Accounting
Principles, the Fund writes down its rental equipment to its estimated net
realizable value when the amounts are reasonably estimated and only
recognizes gains upon actual sale of its rental equipment. As a result,
$63,700 and $10,625 was charged to write-down of equipment to net
realizable value for the three months ended March 31, 1998 and 1997,
respectively. Any future losses are dependent upon unanticipated
technological developments affecting the computer equipment industry in
subsequent years.
The Fund also has equipment leased under the direct financing method in
accordance with Statement of Financial Accounting Standards No. 13. This
method provides for recognition of income (the excess of the aggregate
future rentals and estimated additional amounts recoverable upon expiration
of the lease over the related equipment cost) over the life of the lease
using the interest method.
The net investment in direct financing leases as of March 31, 1998 is as
follows:
Net minimum lease payments to be received $302,000
Less unearned income 30,000
Add expected future residuals -
________
$272,000
========
6
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. EQUIPMENT LEASED (CONTINUED)
The future approximate minimum rentals to be received on noncancellable
operating leases and direct financing leases as of March 31, 1998 are as
follows:
Direct
Years Ending December 31 Operating Financing
________________________ _________ _________
1998 $2,521,000 $ 85,000
1999 2,522,000 113,000
2000 1,185,000 104,000
__________ ________
$6,228,000 $302,000
========== ========
Subsequent to March 31, 1998, the Fund purchased $238,379 of equipment
subject to an operating lease with an initial lease term of 47 months. The
future approximate minimum rentals to be received on this noncancellable
operating lease are $47,478 in 1998, $63,304 in 1999, $63,304 in 2000,
$63,304 in 2001 and $10,551 in 2002.
2. RELATED PARTY TRANSACTIONS
The General Partner receives 5% or 2% of rental payments on equipment under
operating leases and full pay-out leases, respectively, for administrative
and management services performed on behalf of the Fund. Full pay-out
leases are noncancellable leases for which the rental payments during the
initial term are at least sufficient to recover the purchase price of the
equipment, including acquisition fees. This management fee is paid monthly
only if and when the Limited Partners have received distributions for the
period from January 1, 1991 through the end of the most recent quarter
equal to a return for such period at a rate of 12% per year on the
aggregate amount paid for their units.
The General Partner may also receive up to 3% of the proceeds from the sale
of the Fund's equipment for services and activities to be performed in con-
nection with the disposition of equipment. The payment of this sales fee
is deferred until the Limited Partners have received cash distributions
equal to the purchase price of their units plus a 12% cumulative compounded
Priority Return. Based on current estimates, it is not expected that the
Fund will be required to pay this sales fee to the General Partner.
Additionally, the General Partner and its parent company are reimbursed by
the Fund for certain costs of services and materials used by or for the
Fund except those items covered by the above-mentioned fees. Following is
a summary of fees and costs of services and materials charged by the
General Partner or its parent company during the three months ended
March 31:
1998 1997
________ ________
Management fee $45,690 $60,117
Reimbursable costs 57,353 60,824
7
FIDELITY LEASING INCOME FUND VII, L.P.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. RELATED PARTY TRANSACTIONS (CONTINUED)
The Fund maintains its checking and investment accounts in Jefferson Bank,
a subsidiary of JeffBanks, Inc., in which the Chairman of Resource America,
Inc. serves as a director.
Amounts due from related parties at March 31, 1998 and December 31, 1997
represent monies due the Fund from the General Partner and/or other
affiliated funds for rentals and sales proceeds collected and not yet re-
mitted to the Fund.
Amounts due to related parties at March 31, 1998 and December 31, 1997
represent monies due to the General Partner and/or its parent company for
the fees and costs mentioned above, as well as, rentals and sales proceeds
collected by the Fund on behalf of other affiliated funds.
3. CASH DISTRIBUTIONS
There were no cash distributions made to partners for the three months
ended March 31, 1998.
8
FIDELITY LEASING INCOME FUND VII, L.P.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Fidelity Leasing Income Fund VII, L.P. had revenues of $1,062,456 and
$1,295,371 for the three months ended March 31, 1998 and 1997, respectively.
Rental income from the leasing of equipment accounted for 97% and 93% of total
revenues for the first quarter of 1998 and 1997, respectively. The decrease
in revenues is primarily attributable to a decrease in rental income.
Rental income decreased during 1998 by approximately $572,000 because of
equipment which came off lease and was re-leased at lower rental rates or sold.
This decrease, however, was mitigated by an increase of approximately $400,000
in rental income realized from equipment purchases made since March 31, 1997.
Additionally the Fund recognized a net gain on sale of equipment of $916 during
the first quarter of 1998 as compared to a net gain on sale of equipment of
$49,165 for the first quarter of 1997 which contributed to the overall decrease
in total revenues in 1998, as well.
Expenses were $1,114,385 and $1,149,767 during the three months ended
March 31, 1998 and 1997, respectively. Depreciation comprised 81% and 87% of
total expenses during the first quarter of 1998 and 1997, respectively. The
decrease in expenses is primarily related to the decrease in deprecation
expense due to equipment which came off lease or was terminated and sold.
However, the increase in write-down of equipment to net realizable value
reduced the amount of the overall decrease in expenses in 1998. Based upon the
quarterly review of the recoverability of the undepreciated cost of rental
equipment, $63,700 and $10,625 was charged to operations to write down
equipment to its estimated net realizable value during the three months ended
March 31, 1998 and 1997, respectively. Any future losses are dependent upon
unanticipated technological developments affecting the computer equipment
industry in subsequent years.
For the three months ended March 31, 1998 and 1997, the Fund had net income
(loss) of ($51,929) and $145,604, respectively. The earnings (loss) per
equivalent limited partnership unit, after earnings (loss) allocated to the
General Partner were ($1.72)and $4.68 based on a weighted average number of
equivalent limited partnership units outstanding of 29,850 and 30,771 for the
three months ended March 31,1998 and 1997, respectively.
The Fund generated $919,111 and $1,105,440 of cash from operations, for
the purpose of determining cash available for distribution, during the quarter
ended March 31, 1998 and 1997, respectively. It is the Fund's policy to make
cash distributions in accordance with the net income earned by the Fund. For
the first quarter of 1998, there were no cash distributions made to partners.
However, $80,000 of cash distributions were paid during the first quarter of
1998 for the months of October and November of 1997. The Fund distributed 4%
of cash available from operations to partners during he first quarter of 1997
and 9% of this amount to partners subsequent to the first quarter of 1997. For
financial statement purposes, the Fund records cash distributions to partners
on a cash basis in the period in which they are paid.
9
FIDELITY LEASING INCOME FUND VII, L.P.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
ANALYSIS OF FINANCIAL CONDITION
During the quarter ended March 31, 1998 and 1997, the Fund purchased
$3,097,961 and $13,067, respectively of equipment. The Fund will continue to
purchase equipment with cash available from operations which is not distributed
to partners.
Subsequent to March 31, 1998, the Fund purchased $238,379 of equipment for
lease.
The cash position of the Fund is reviewed daily and cash is invested on a
short-term basis.
The Fund's cash from operations is expected to continue to be adequate to
cover all operating expenses and contingencies during the next twelve month
period.
10
Part II: Other Information
FIDELITY LEASING INCOME FUND VII, L.P.
March 31, 1998
Item 1. Legal Proceedings: Inapplicable.
Item 2. Changes in Securities: Inapplicable.
Item 3. Defaults Upon Senior Securities: Inapplicable.
Item 4. Submission of Matters to a Vote of Securities Holders: Inapplicable.
Item 5. Other Information: Inapplicable.
Item 6. Exhibits and Reports on Form 8-K:
a) Exhibits: None
b) Reports on Form 8-K: None
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the regis-
trant has duly caused this report to be signed on its behalf by the under-
signed, thereunto duly authorized.
FIDELITY LEASING INCOME FUND VII, L.P.
5-14-98 By: Freddie M. Kotek
_______ ___________________________
Date Freddie M. Kotek
President of
F.L. Partnership Management, Inc.
(Principal Operating Officer)
5-14-98 By: Marianne T. Schuster
_______ ___________________________
Date Marianne T. Schuster
Vice President of
F.L. Partnership Management, Inc.
(Principal Financial Officer)
12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,870,009
<SECURITIES> 0
<RECEIVABLES> 409,003
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,279,012
<PP&E> 15,507,299
<DEPRECIATION> 7,228,592
<TOTAL-ASSETS> 10,830,229
<CURRENT-LIABILITIES> 593,324
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,236,905
<TOTAL-LIABILITY-AND-EQUITY> 10,830,229
<SALES> 1,034,908
<TOTAL-REVENUES> 1,062,456
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,114,385
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (51,929)
<INCOME-TAX> 0
<INCOME-CONTINUING> (51,929)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51,929)
<EPS-PRIMARY> (1.72)
<EPS-DILUTED> (1.72)
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